A little over a month after the exit of Charles Prince, Citigroup tapped Vikram Pandit to lead the firm.

Citigroup also said that Sir Win Bischoff, who formerly headed up Citi's European unit, would succeed Robert Rubin as company chairman.

NEW YORK (CNNMoney.com) -- After weeks of uncertainty about the company's future leadership, Citigroup anointed its investment banking chief Vikram Pandit as its new chief executive and tapped interim CEO Sir Win Bischoff as chairman.

The New York-based bank said Pandit would take over as CEO effective immediately.

"The combination of his deep executive experience and long history as a strategic thinker makes him the outstanding choice to be Citi's CEO," Robert Rubin, Citigroup's acting chairman since last month, said in a prepared statement.

Tuesday's announcement comes after much speculation that Pandit would assume the throne at Citigroup - one of the companies on Wall Street hardest hit by the ongoing credit crisis.

Since the summer, Citigroup has suffered billions of dollars of writedowns due to bad mortgage bets and witnessed the departure of former CEO Charles Prince.

Citigroup (Charts, Fortune 500) shares, which have plunged 40 percent so far this year, finished more than 4 percent lower on the New York Stock Exchange Tuesday.

In addition to announcing the appointments of Pandit and Bischoff, the company also said that Rubin, who served as Treasury secretary during the Clinton administration, will return to his previous role as a director.

To succeed him in the chairman's post, Citigroup picked the 66-year-old Bischoff, formerly head of Citi's European unit. He was named interim CEO on Nov. 4 following the departure of Prince.

Pandit and Citi

It was just under eight months ago that the India-born Pandit arrived at Citigroup, after the company acquired Old Lane Partners - a hedge fund he co-founded.

Taking the helm at the company's alternative investments division, Pandit, 50, was soon given the responsibility of overseeing the company's investment banking and fixed-income division following the departure of two key executives in mid-October.

While potential candidates for the top spot, including Robert Willumstad, a former Citigroup president who is now chairman at AIG, and BlackRock (Charts) CEO Lawrence Fink, Pandit won out with the support of such key directors as Rubin.

Analysts like Standard & Poor's Frank Braden said the move made sense given the limited field of candidates.

"I think he's the best person available for the job," said Braden. "He's an outsider, but he's had a couple months to really understand the culture of Citi."

Prior to joining Citi, Pandit spent the better part of his career at Morgan Stanley (Charts, Fortune 500), where he served most recently as president and chief operating officer of institutional securities.

Pandit, a graduate of Columbia University who also obtained a doctorate in finance at his alma mater, was even mentioned as a candidate to one day run Morgan Stanley. But he became one of many executives who parted ways with the company in 2005 following the leadership crisis over then-CEO Phillip Purcell.

Up to the challenge?

While Pandit's experience at Morgan Stanley might prove quite adept at remedying what ails Citigroup, the challenges at the banking giant appear overwhelming even for a veteran CEO, let alone an untested exec such as Pandit.

To date, Citi has reported subprime and trading losses totaling nearly $6 billion and is likely to take billions more in writedowns, especially if it moves its troubled structured investment vehicles onto its balance sheets.

What could also pose difficulties for Pandit is his limited experience in consumer banking, one of the keystones of Citi's business.

"They are not complementing him with someone with more consumer banking exposure - that's the only knock," said Braden.

In a conference call with analysts Tuesday, Pandit said he was "excited" and "honored" by the board's decision and said he was looking at making changes at Citigroup.

Pandit identified his three priorities as improving the company's productivity, growth prospects and culture. He shied away from questions over whether he planned to break up the company from its "supermarket" of financial services business model - an area that Prince was widely criticized for during his tenure.

"We will undertake an objective and dispassionate review of all our businesses," Pandit told analysts. "You have to give me some time to go through our due process."

Pandit also avoided questions about the fate of the company's dividend, saying that decision would rest in the hands of Citi's directors. Some experts had speculated Citi might cut the dividend to raise cash, but Pandit said the firm remained well-capitalized especially after last month's $7.5 billion investment by the Abu Dhabi Investment Authority.

What could prove quite quite favorable to Citi is Tuesday's appointment of Bischoff, at a time when banks and brokerages have made a big push to expand their businesses overseas.

Bischoff spent nearly four decades at the British investment bank Schroeders PLC before Salomon Smith Barney, a division of Citi, acquired the company in 2000. At that time, Bischoff went on to lead Citigroup's European operations.